Older homes are not up to code if need to be rebuilt so level of ordinance is in order. New homes are up to code so you should be good to go. Some new homeowners fall for the level of ordinance option without researching so more money earned by your local insurance agent.
I had a hailstorm ruin my roof a few years ago. My roof was 6 years old and I had replacement cost coverage, the adjuster told me to get a local contractor and get an estimate.
I went to the contractor who did my roof 6 years earlier. His estimate was much higher and I questioned him. He told me the city ordinances had changed and he had to add some things that I didn't have on my original roof, and didn't even want. My adjuster said "yes, he's right" and I got paid what it cost, darn near twice what I paid 6 years before.
I'm glad my insurance company offered ordinance & law coverage and included it in my policy. I never would have thought of it. I'm not in the insurance business, but my agent and the companies he uses have helped me through some situations that could have devastated me.
Even if you have a new house and don't think you need ordinance & law coverage now, are you going to remember in a few years when may need to? Are you going to blame your agent if they don't ask you in 5 or 10 years when there are new codes on the books?
Be glad your insurer brought it to your attention, if they didn't some people would criticize them for that too and tell you to sue your agent for not having you covered properly.
I hope that my insurer would contact me when a situation like this comes up. I can make the decision myself. Insurance companies didn't invent ordinance & law ordinances, they came up with solutions that can let the rest of us get the coverage we need to address them. It's up to us if we want them or not.
To the OP. Ask your agent what they think, better yet discuss it with a reputable contractor and ask him if there are any new codes that you need to follow.
If it raises your premium, raise your deductible a little bit to offset it, you'll be far ahead if you ever need to file a claim.